Dynare forums

Dear all,
I run dynare example files written by Jesus Fernandez-Villaverde, i.e. rbc_mod and rbc_indivisible_mod. I am just wondering could someone explain to me why the moments of consumption (c) is exactly identical to that of the average labor productivity (y_l). In particular the matrix of correlation and coefficient of autocorrelation. Is there anything wrong with the model set up?

Thanks
Siwage

Hi:

I just run my code and it works fine. I get different correlations and autocorrelations. Why don't you try to download and run it again

J

Hi Jesus,
Thanks for your answer. I did what you've suggested. It works for rbc_mod.mod but not for rbc_indivisible_mod.mod. I still get the same identical second moment for both c and y_l. When I check the latter code, there is only one small difference. In the model set up, LHS of second equation is not divided by (1-l) as in the rbc_mod.mod code. When I fix this, everything is fine. So the basic RBC model is the same as the RBC model with indivisible labor (using the same parameters). Am I right?

Siwage

Siwage,

the indivisible labor model is different from the canonical RBC model and the difference is in the second equation. Check the original Hansen paper to understand why it so.
When you look at the second equation, you will also undrestand that consumption and labor productivity are perfectly correlated because one is propotional to the other.

Best

Michel